Not All Final Expense Plans Are Created Equally

 When it comes to final expense insurance, there are a few options, but not all of them are created equal. One of the biggest mistakes people make is carrying a term policy and expecting it to cover their funeral. The truth is, no one buys a 20-year term policy because they think they won’t live another 20 years. If they have a health issue that leads them to believe that, the insurance company likely won’t sell them a 20-year term policy. That’s the problem with term insurance—it’s temporary coverage, and 99% of term policies do not result in a claim being paid.

You’re better off having an accidental policy along with some whole life coverage. At the very least, start with a whole life policy. If it’s affordable and your family is still young, consider taking out an additional term policy. Then, down the road, when your children are older and self-sufficient, the term policy can terminate, leaving you with a whole life policy at a premium much cheaper than if you had waited. Plus, you’ll have the cash value available.

One of the plans I offer is a 20-pay life policy. Rather than paying premiums for the rest of your life, you only have to pay for 20 years, and then the policy is covered for life. The younger you are, the cheaper it is. Term life is sold to people in very good health, while whole life often has a two-year stipulation at the beginning. Some people claim they don’t want to wait two years, but the truth is, if they qualify for day-one coverage, the policy still has a two-year contestability period.

Some companies base qualification on health questions. If you answer "no" to all the questions, the company will issue the policy. If death occurs within the first two years, that’s when the company will gather all your medical documentation, but first and foremost, they’ll look at your prescription history. The company I work with will only issue day-one coverage if they’ve reviewed your prescription report first.

One of the struggles I face as an agent is feeling the need to share details that can sometimes stop a prospect from buying. I want my clients to know everything, but when I explain that every policy has a two-year waiting period—whether it’s for contestability or a modified benefit—they might think they can get something different elsewhere. I battle with sharing this information because I know other agents wouldn’t mention it.

I’m not a typical salesman; I just know the product really well. It’s a catch-22—damned if you do, damned if you don’t. Occasionally, someone gets a quote from a company offering term insurance and tries to make an apples-to-apples comparison with a whole life policy. I do my best to explain, but sometimes they just don’t care.

It’s the same concept as someone who feels like they’ve done their due diligence just by sending in a form, as if that somehow takes care of it. If I want life insurance, I’m going to reach out and get coverage right then and there. I’m not going to fill out something that comes in the mail, forget about it, and then purchase it on the spot if the agent shows up when I’m home just because they’re a great salesman.

That’s what’s wrong with the industry. People cancel one policy in exchange for another all the time because they get a better rate, but it doesn’t matter how long they’ve had the policy. No one would cancel a policy they’ve had for three years and take out a brand new one if they understood the contestability period. It doesn’t take much for a company to rescind a policy during this period. Companies want to collect at least two years’ worth of premiums before paying out a claim, which is why many have a two-year waiting period.

They’re avoiding adverse selection—they don’t want people buying insurance when they think they need it the most, but people still do. Some people could have multiple health issues and still be frustrated that they’re not covered from day one. Suddenly, they forget why insurance companies have a bad reputation and expect that just because they’re buying a policy, they should be covered immediately—even though they’ve had 60 years to buy one.

The best thing you can do is accept that when you pass away, your family will need to come up with money. If you use a portion of your income to pay for a policy monthly, it will guarantee a lump-sum, income tax-free death benefit that your family can use to pay for your funeral, whether it’s a cremation or burial. But the longer you wait, the harder and more expensive it becomes to get a good plan and feel confident about it.

If you’re ready to secure your family’s future and ensure they won’t be left scrambling, reach out to me today. Let’s find the best plan for your needs and give you peace of mind. 

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